Foreclosure Summary Judgment Requires Identified/Annexed Business Records to Prove Default; New Default Grounds Cannot Be Raised for First Time in Reply

1. Introduction

Deutsche Bank Natl. Trust Co. v PF Holding, LLC (2026 NY Slip Op 02967 [249 AD3d 844] [2d Dept May 13, 2026]) is a foreclosure decision emphasizing two recurring procedural and evidentiary constraints in New York mortgage litigation: (1) a lender moving for summary judgment must prove the borrower’s default in admissible form—an affidavit that merely references unspecified, unproduced servicing records is hearsay and cannot carry the lender’s prima facie burden; and (2) the lender may not pivot in reply to a new theory of default (here, an alleged transfer in violation of the mortgage) where the opposing party had no fair opportunity to respond.

The plaintiff, Deutsche Bank National Trust Company, sought foreclosure of a 2004 note and mortgage originally executed by Rachel Basher. Basher later transferred the property to RB East 13, LLC (the principal appellant). The Supreme Court (Kings County) granted the plaintiff summary judgment and an order of reference, confirmed a referee’s report, and entered a judgment of foreclosure and sale. The Appellate Division, Second Department reversed, holding the plaintiff failed to establish default with admissible evidence and improperly raised a new default theory in reply.

2. Summary of the Opinion

  • Appellate posture: The court dismissed certain appeals as procedurally unavailable:
    • Appeal from the order denying reargument dismissed (“no appeal lies from an order denying reargument”).
    • Direct appeals from interlocutory orders dismissed because entry of the foreclosure judgment terminated the right of direct appeal, though issues were reviewable on the appeal from the final judgment (citing Matter of Aho and CPLR 5501[a][1]).
    • Nonparty Rachel Basher’s appeal dismissed because she was not “aggrieved” (CPLR 5511).
  • Merits: The Second Department reversed the order and judgment of foreclosure and sale as to RB East 13, LLC, denied:
    • the branches of the plaintiff’s motion that were, in effect, for summary judgment and an order of reference; and
    • the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale.
  • Core holdings:
    • The plaintiff failed to prove default because its servicer’s employee affidavit did not identify or annex the business records on which it relied; thus, the affidavit’s statements about nonpayment were inadmissible hearsay under Bank of N.Y. Mellon v Gordon.
    • The plaintiff’s attempt to argue a different default (transfer without permission) for the first time in reply was improper under Dannasch v Bifulco, particularly where the defendant had no opportunity to respond via surreply (citing Matter of TIG Ins. Co. v Pellegrini).
    • Because the plaintiff did not meet its prima facie burden, the motion had to be denied “regardless of the sufficiency of the defendant’s opposition papers” (citing Citimortgage, Inc. v Sultan and Winegrad v New York Univ. Med. Ctr.).

3. Analysis

3.1. Precedents Cited

Appellate procedure and reviewability

  • Matter of Aho, 39 NY2d 241, 248 [1976]
    Used for the rule that the right to direct appeal from prior orders ends upon entry of the final judgment; those issues may still be reviewed on appeal from the judgment under CPLR 5501(a)(1). The court applied this to dismiss direct appeals from the January 31, 2023 and December 20, 2023 orders while still considering the issues through the appeal from the foreclosure judgment.
  • CPLR 5511
    Applied to dismiss Rachel Basher’s appeal because only an “aggrieved” party may appeal; as a discontinued defendant/nonparty, she was not aggrieved by the foreclosure judgment entered against RB East 13, LLC’s interest.

Foreclosure summary judgment—prima facie case and burden allocation

  • Citimortgage, Inc. v Sultan, 230 AD3d 1292, 1293-1294 [2024]
    Quoted for the basic foreclosure summary judgment framework: production of the mortgage, the unpaid note, and evidence of default. Critically, it is also cited for the “regardless of the sufficiency of the defendant’s opposition papers” principle: if the movant fails to make a prima facie showing, the motion fails.
  • Wells Fargo Bank, N.A. v Pane, 210 AD3d 934, 935 [2022]
    Cited alongside Sultan for the standard elements of a foreclosure plaintiff’s prima facie showing.
  • U.S. Bank Trust, N.A. v Smith, 217 AD3d 899, 900 [2023]
    Cited for the proposition that the plaintiff must establish entitlement to judgment “by proof in admissible form,” underscoring that foreclosure affidavits must satisfy evidentiary rules (not merely pleading or conclusory standards).
  • Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]
    The canonical summary judgment rule: failure to make a prima facie showing requires denial of the motion irrespective of opposing papers. The court invoked it to foreclose any argument that defendant’s opposition shortcomings could salvage plaintiff’s deficient proof of default.

Business records, hearsay, and proving “default”

  • Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 205-206 [2019]
    This is the opinion’s evidentiary fulcrum. The Second Department reiterated that under CPLR 4518(a) “it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted.” Without the actual records, testimony about their contents is hearsay. The court used Gordon to hold the servicer employee’s affidavit inadequate where it referenced a “review and examination of the records” but did not identify or attach them.
  • Deutsche Bank Trust Co. Ams. v Tagor, 238 AD3d 983, 986 [2025]
    Cited as a recent application of the same principle: default cannot be proven through an affidavit that fails to annex or properly present the business records.
  • U.S. Bank N.A. v Medina, 230 AD3d 1371, 1376 [2024]
    Reinforces that statements of default drawn from unproduced records are inadmissible hearsay; supports the court’s conclusion that the plaintiff did not carry its burden on default.

Limits on reply papers

  • Dannasch v Bifulco, 184 AD2d 415, 417 [1992]
    Quoted for the general rule that reply papers may respond to opposition but may not introduce new arguments or grounds. The plaintiff’s new theory—that the property transfer itself constituted a default under the mortgage—was raised “for the first time” in reply and thus violated this rule.
  • Matter of TIG Ins. Co. v Pellegrini, 258 AD2d 658, 658 [1999]
    Cited for the unfairness/impropriety of considering new reply content where the opponent had no opportunity to respond via surreply. The court emphasized that the appellant lacked such an opportunity, rendering any reliance on the new reply theory improper.

3.2. Legal Reasoning

The decision proceeds in a disciplined sequence typical of Second Department foreclosure review:

  1. Define the prima facie burden. The court restated that a foreclosure plaintiff must produce the mortgage, the unpaid note, and admissible proof of default (Citimortgage, Inc. v Sultan; Wells Fargo Bank, N.A. v Pane), and that the plaintiff must do so with “proof in admissible form” (U.S. Bank Trust, N.A. v Smith).
  2. Test the default proof against evidentiary rules. Although a default may be proven by a witness with personal knowledge or by admissible records, the plaintiff relied on an affidavit from its servicer’s employee (Carrington) asserting, based on her review of records, that installments were not paid beginning February 1, 2010. Under Bank of N.Y. Mellon v Gordon, that is not enough unless the records themselves are properly presented. Because the affiant neither identified the particular records nor annexed them, her narrative of nonpayment was hearsay.
  3. Reject “new default theory” raised in reply. The plaintiff attempted to rehabilitate its showing by newly claiming that the 2011 transfer to RB East 13, LLC constituted a default under the mortgage (a due-on-sale/consent-to-transfer type theory). The court held this was improperly raised for the first time in reply under Dannasch v Bifulco, and improper to consider where the appellant had no surreply opportunity under Matter of TIG Ins. Co. v Pellegrini.
  4. Apply the “prima facie failure ends the inquiry” rule. Having found the plaintiff’s proof deficient, the court denied summary judgment and the order of reference “without regard to the sufficiency of the opposing papers” (Winegrad v New York Univ. Med. Ctr.; Citimortgage, Inc. v Sultan).
  5. Downstream relief collapses. Because summary judgment and the order of reference were not warranted, the later confirmation of the referee’s report and the judgment of foreclosure and sale could not stand.

3.3. Impact

  • Stricter motion practice discipline in foreclosure matters. The decision reinforces that “servicer affidavit” practice cannot substitute for admissible proof. Foreclosure plaintiffs in the Second Department should expect denial where an affiant paraphrases payment history without attaching (and implicitly, without clearly identifying) the underlying records.
  • Operational consequences for lenders/servicers. Motion packages must be built to CPLR 4518(a): include the relevant payment history/loan accounting, clearly link it to the affiant’s foundation, and avoid generic references to “records.” Failures risk not only denial of summary judgment but also reversal of judgments entered downstream.
  • Pleading and motion strategy: include all default theories upfront. If a lender wishes to pursue a nonpayment default and a contractual default (e.g., transfer without consent), it should raise and support both in its opening motion papers. Holding a theory back for reply risks exclusion as procedurally improper—particularly where no surreply is permitted as of right.
  • Fairness emphasis in motion practice. The court’s treatment of the new reply argument reflects a broader institutional concern with notice and opportunity to be heard; foreclosure motions often move quickly, and this opinion underscores that efficiency does not excuse ambush.

4. Complex Concepts Simplified

  • Summary judgment: A pretrial ruling granted only where there is no triable issue of fact and the movant proves entitlement to judgment as a matter of law using admissible evidence.
  • Prima facie case (foreclosure): The minimum showing the lender must make at the outset—typically the mortgage, the unpaid note, and admissible proof of default.
  • Hearsay: An out-of-court statement offered for its truth. A witness cannot usually prove “the records say X” unless the records are admissible.
  • Business records exception (CPLR 4518[a]): A pathway to admit records made in the regular course of business. Importantly, the exception is about admitting the records; an affidavit that merely summarizes unproduced records generally remains hearsay under this line of cases.
  • Order of reference / referee’s report: In foreclosure practice, once the plaintiff establishes entitlement to foreclose, a referee is often appointed to compute the amount due. If the entitlement finding fails, the reference and subsequent computations cannot stand.
  • Reply papers and “new arguments”: Reply is for responding to opposition, not for unveiling a new basis for relief. Courts may reject or refuse to consider new theories raised only in reply because the opponent had no fair chance to respond.
  • “Aggrieved” (CPLR 5511): Only a party whose rights are adversely affected by an order/judgment may appeal. A person who is not legally harmed by the ruling cannot.
  • Reargument is not appealable: New York procedure generally bars appeals from orders denying reargument; the remedy is to appeal from an appealable order/judgment raising the underlying issues.

5. Conclusion

Deutsche Bank Natl. Trust Co. v PF Holding, LLC strengthens two practical rules in Second Department foreclosure litigation: (1) default must be proven in admissible form, and a servicing-agent affidavit that neither identifies nor annexes the business records it relies on is hearsay and insufficient; and (2) lenders may not salvage deficient opening papers by asserting a new default theory for the first time in reply. The opinion’s broader significance lies in its insistence on evidentiary rigor and procedural fairness at the summary judgment stage—constraints that can determine whether a foreclosure proceeds to sale or returns to litigation.